🔗 Share this article

The charge represents a grave matter: suggesting Rachel Reeves may have misled the British public, frightening them to accept billions in extra taxes that could be funneled into higher welfare payments. While exaggerated, this isn't typical Westminster sparring; on this occasion, the stakes are higher. A week ago, detractors of Reeves and Keir Starmer had been labeling their budget "a shambles". Today, it is branded as falsehoods, with Kemi Badenoch calling for the chancellor to quit.

This serious charge demands clear answers, therefore let me provide my view. Has the chancellor tell lies? Based on current information, apparently not. There were no major untruths. However, despite Starmer's recent comments, that doesn't mean there is nothing to see and we can all move along. Reeves did mislead the public about the considerations informing her choices. Was this all to funnel cash to "benefits street", like the Tories claim? No, and the figures demonstrate this.

A Reputation Sustains Another Blow, Yet Truth Should Prevail

The Chancellor has taken a further blow to her reputation, but, if facts still matter in politics, Badenoch ought to stand down her lynch mob. Maybe the resignation recently of OBR head, Richard Hughes, due to the leak of its internal documents will satisfy Westminster's thirst for blood.

Yet the true narrative is far stranger than the headlines suggest, extending wider and further beyond the careers of Starmer and his class of '24. At its heart, herein lies an account concerning what degree of influence the public have in the governance of our own country. This should should worry everyone.

First, on to the Core Details

After the OBR published last Friday a portion of the projections it shared with Reeves as she prepared the budget, the surprise was instant. Not only had the OBR never acted this way before (described as an "rare action"), its figures seemingly went against Reeves's statements. Even as rumors from Westminster were about how bleak the budget was going to be, the OBR's own forecasts were getting better.

Consider the government's most "iron-clad" fiscal rule, that by 2030 day-to-day spending on hospitals, schools, and other services would be wholly funded by taxes: at the end of October, the OBR reckoned this would just about be met, albeit only by a minuscule margin.

A few days later, Reeves gave a media briefing so extraordinary that it caused morning television to break from its usual fare. Several weeks before the actual budget, the country was put on alert: taxes would rise, and the main reason being gloomy numbers provided by the OBR, specifically its finding suggesting the UK was less efficient, investing more but getting less out.

And so! It came to pass. Despite what Telegraph editorials combined with Tory media appearances suggested over the weekend, this is essentially what happened during the budget, that proved to be significant, harsh, and grim.

The Deceptive Justification

The way in which Reeves deceived us concerned her justification, because these OBR forecasts didn't force her hand. She could have chosen different options; she could have provided alternative explanations, even on budget day itself. Prior to last year's election, Starmer promised precisely this kind of public influence. "The hope of democracy. The strength of the vote. The possibility for national renewal."

One year later, and it's a lack of agency that jumps out from Reeves's pre-budget speech. Our first Labour chancellor for a decade and a half casts herself as a technocrat at the mercy of forces outside her influence: "In the context of the long-term challenges on our productivity … any finance minister of any party would be in this position today, confronting the choices that I face."

She did make decisions, only not one the Labour party wishes to publicize. Starting April 2029 British workers as well as businesses are set to be contributing an additional £26bn a year in tax – and most of that will not go towards funding better hospitals, public services, or happier lives. Regardless of what bilge comes from Nigel Farage, Badenoch and their allies, it is not being lavished upon "welfare claimants".

Where the Cash Really Goes

Rather than being spent, over 50% of this additional revenue will instead provide Reeves cushion for her own fiscal rules. Approximately 25% goes on paying for the administration's U-turns. Examining the OBR's calculations and giving maximum benefit of the doubt towards a Labour chancellor, a mere 17% of the tax take will go on genuinely additional spending, for example abolishing the limit on child benefit. Removing it "costs" the Treasury only £2.5bn, because it was always an act of political theatre from George Osborne. A Labour government could and should have binned it in its first 100 days.

The True Audience: The Bond Markets

Conservatives, Reform and the entire Blue Pravda have spent days barking about how Reeves fits the stereotype of Labour chancellors, soaking hard workers to fund the workshy. Party MPs have been cheering her budget for being a relief to their social concerns, safeguarding the most vulnerable. Both sides could be completely mistaken: Reeves's budget was primarily targeted towards investment funds, hedge funds and participants within the bond markets.

The government could present a compelling argument in its defence. The margins from the OBR were too small to feel secure, particularly given that bond investors charge the UK the highest interest rate among G7 developed nations – exceeding that of France, which lost its leader, higher than Japan which has far greater debt. Combined with the policies to hold down fuel bills, prescription charges as well as train fares, Starmer and Reeves can say this budget enables the central bank to reduce its key lending rate.

You can see why those folk with red rosettes may choose not to couch it in such terms when they're on #Labourdoorstep. According to one independent adviser for Downing Street puts it, Reeves has effectively "weaponised" the bond market as a tool of discipline against Labour MPs and the electorate. This is why Reeves can't resign, regardless of which promises she breaks. It is also the reason Labour MPs must knuckle down and support measures that cut billions from social security, as Starmer indicated yesterday.

A Lack of Statecraft and a Broken Pledge

What is absent from this is any sense of statecraft, of harnessing the finance ministry and the central bank to forge a fresh understanding with markets. Also absent is any intuitive knowledge of voters,